Ohio Senate Passes Pension Reform Legislation; STRS Ohio Hopeful That House of Representatives Will Take Action
Executive Director Michael Nehf reported at the May Retirement Board meeting that the Ohio Senate passed STRS Ohio’s long-awaited pension reform bill (Sub. Senate Bill 342) on May 16 by a 31–2 vote, paving the way for the House to hopefully take similar action yet this year. Retirement Board Chair Jim McGreevy expressed appreciation to the Senate and to the bill’s co-sponsors, Senate President Tom Niehaus (R-New Richmond) and Senate Minority Leader Eric Kearney (D-Cincinnati) for taking action on pension reform. McGreevy also complimented STRS Ohio stakeholders for their work in support of the bill.
On May 8, the co-sponsors introduced four pension reform bills that were assigned to the Senate Insurance, Commerce and Labor Committee. In testimony that afternoon, Nehf told Committee members that the changes represent “the first time in STRS Ohio’s history that benefit reductions were being sought,” and that the changes are “necessary to preserve the pension fund and for the plan to meet its funding obligations.” The executive director’s complete testimony is available on the STRS Ohio website. Additional testimony from STRS Ohio constituents in support of the bill acknowledged that the pension reform changes are necessary to strengthen the financial condition of the retirement system. The Committee passed the bill on May 15 in an 11–1 vote.
STRS Ohio first addressed pension reform in 2009, when the Retirement Board approved a plan to modify benefits in September of that year. In response to constituent and Statehouse input, the board amended its proposal in October 2010 and January 2011. The reform package went through one more revision in April 2012 following additional review and study by the Retirement Board — steps that were vital in creating a clear picture of the system’s financial condition. The plan’s components include:
•Increasing age and service requirements for retirement.
•Lowering the benefit formula.
•Increasing the number of years in the final average salary calculation.
•Increasing the member contribution rate.
•Lowering the cost-of-living adjustment (COLA) for current and future retirees; freezing the COLA for one year for current retirees; and deferring the COLA until 60 months after the date of retirement for new retirees.
A more detailed list of the changes is available on the STRS Ohio website.
The bill also includes provisions that the Retirement Board approved at a special meeting on May 15. These provisions would give the Retirement Board authority in the future to adjust member contribution rates, the COLA, and age and service requirements without legislative approval — on the condition that these adjustments would not materially impair the fiscal integrity of the retirement system or are necessary to preserve the fiscal integrity of the retirement system.
All of the changes in STRS Ohio’s proposed plan require legislative action by the Ohio General Assembly and the governor, as all the plan components require changes in existing statute. Now, with the action taken by the Ohio Senate, STRS Ohio will turn its attention to the House of Representatives. STRS Ohio will continue to use our newsletters, website, eUPDATE email news service and face-to-face meetings to keep members informed about the progress of the legislation and any changes going forward.
Retirement Board Approves Changes to Regional Health Care Plans
At its May meeting, the Retirement Board approved health care program changes that will affect benefit recipients enrolled in the AultCare and Paramount regional plans beginning January 2013. These changes are in response to changes the board approved in April to its national plans (Medical Mutual, Aetna and Express Scripts). Enrollment in the regional plans is about 6% of the total STRS Ohio health care enrollment.
Highlights of the approved 2013 regional plan changes include:
•Changing AultCare deductibles, out-of-pocket maximums and copayments for emergency room and urgent care to levels similar to the Medical Mutual Plus Plan and Aetna Medicare Plan (PPO).
•Eliminating one of two Medicare Paramount plans that has only eight enrollees.
•Applying the Express Scripts pharmacy changes (approved by the board in April) to the AultCare and Paramount plans.
Additional 2013 plan information will be provided in the July issue of STRS Ohio News for Benefit Recipients and in open-enrollment materials. There are no changes to the 2013 Kaiser plans. In June, Member Benefits staff is expected to present final 2013 health care premiums for board consideration.
The Retirement Board approved 92 active members and 83 inactive members for retirement.
Other STRS Ohio News
STRS Ohio Received Nearly $190 Million Through Retiree Drug Subsidy Program
Since 2006, STRS Ohio has received federal subsidies through its participation in the Retiree Drug Subsidy (RDS) Program available through the Centers for Medicare & Medicaid Services (CMS). These subsidies, totaling nearly $190 million, are based on Medicare enrollees’ prescription drug claims incurred between Jan. 1, 2006, and Dec. 31, 2010. The subsidy money is deposited in the Health Care Stabilization Fund.
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